New tax-free childcare scheme now available to all

HMRC announced on 14 February that it was finally starting to accept applications from all eligible parents for the government’s new tax-free childcare scheme – which can give up to £2,000 of help with childcare costs.

Since 21 April 2017 the government has been rolling out its new tax-free childcare scheme for parents of children under 12 (or under 17 for children with disabilities). Parents of the youngest children became eligible first, and it was expected that all parents would be able to join the scheme by the end of 2017. Following difficulties with the government’s website this was delayed but, applications are now being accepted from all parents.

The new scheme

Like the existing childcare voucher scheme the new scheme is intended to help working parents with the costs of childcare.

Unlike childcare vouchers, the scheme does not depend on employers to offer it, it is run centrally by HMRC.

Parents apply to open an online account which they then use to pay for childcare from a registered provider. This includes nurseries, childminders and nannies as well as after-school clubs and play schemes.

For every £8 a parent pays in they get £2 from the government, up to a maximum of £2,000 per child (or £4,000 for a disabled child).

However, there are certain restrictions: each parent must be in work (including self-employment) and earning at least £120 a week and each parent must have an income of no more than £100,000 per year. The new scheme cannot be used at the same time as parents are receiving childcare vouchers.

End of childcare vouchers in April 2018

Any existing childcare voucher schemes will only be open to new joiners until April this year. After that the new tax-free childcare scheme will replace vouchers. Employees who are already members of a childcare voucher scheme on that date can stay in, provided their employer continues to run the scheme. Parents should nevertheless check if they may be better off under the new scheme.